Authors: Martín Almuzara, Richard Audoly, and Davide Melcangi
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Staff Reports
A Measure of Core Wage Inflation
Number 1067
July 2023 Revised January 2024
July 2023 Revised January 2024
JEL classification: C33, E24
We recover the persistent (“core”) component of nominal wage growth over the past twenty-five years in the United States. Our approach combines worker-level data with time-series smoothing methods and can disentangle the common persistence of wage inflation from the persistence specific to some subgroup of workers, such as workers in a specific industry. We find that most of the business cycle fluctuations in wage inflation are persistent and driven by a common factor. This common persistent factor is particularly important during inflationary periods, and it explains 80 to 90 percent of the post-pandemic surge in wage inflation. Contrary to standard measures of wage inflation, the persistent component of wage inflation contemporaneously co-moves with labor market tightness.
Author Disclosure Statement(s)
Martín Almuzara
I declare that I have no relevant or material financial interests that relate to the research described in the paper “A measure of core wage inflation” submitted for your consideration as a New York Fed Staff Report. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Richard Audoly
I declare that I have no relevant or material financial interests that relate to the research described in the paper “A measure of core wage inflation” submitted for your consideration as a New York Fed Staff Report. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Davide Melcangi
I declare that I have no relevant or material financial interests that relate to the research described in the paper “A measure of core wage inflation” submitted for your consideration as a New York Fed Staff Report. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
I declare that I have no relevant or material financial interests that relate to the research described in the paper “A measure of core wage inflation” submitted for your consideration as a New York Fed Staff Report. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Richard Audoly
I declare that I have no relevant or material financial interests that relate to the research described in the paper “A measure of core wage inflation” submitted for your consideration as a New York Fed Staff Report. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Davide Melcangi
I declare that I have no relevant or material financial interests that relate to the research described in the paper “A measure of core wage inflation” submitted for your consideration as a New York Fed Staff Report. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
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